Quadratic hedging in affine stochastic volatility models

  title={Quadratic hedging in affine stochastic volatility models},
  author={Jan Kallsen},
We determine the variance-optimal hedge for a subset of affine processes including a number of popular stochastic volatility models. This framework does not require the asset to be a martingale. We obtain semiexplicit formulas for the optimal hedging strategy and the minimal hedging error by applying general structural results and Laplace transform techniques. The approach is illustrated numerically for a Lévydriven stochastic volatility model with jumps as in Carr et al. (2003). 

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